SEC, FSA Officials Meet to Continue Strategic Dialogue

By N. Peter Rasmussen, J.D.

SEC Chairman Mary Schapiro met with U.K. Financial Services Authority Chairman Adair Turner and Chief Executive Hector Sants in London as part of the SEC-FSA Strategic Dialogue. The purpose of the Dialogue, established in 2006, is to engage at the senior levels of the two agencies on current matters affecting the U.S. and UK capital markets and areas of future collaboration. This was the fifth meeting of the Dialogue.

Some of the areas of mutual interest discussed during today's meeting included: 

1. Corporate governance and executive compensation;
2. Disclosure regimes around client asset risk;
3. Regulation of hedge funds and investment advisers and the protection of customer assets;
4. Market infrastructure, particularly relating to central counterparties for OTC derivatives;
5. Market supervision and
6. Cooperation on cross-border supervision. 

At the meeting, the officials agreed that, given the linkages between the U.S. and U.K. markets, enhanced supervisory cooperation is critical to market integrity. Cooperative efforts between the staffs of the two agencies are increasing in areas such as oversight of credit rating agencies, hedge fund advisers and the clearing of OTC derivatives. To facilitate this expanding cooperation, the two agencies plan to review the existing Memorandum of Understanding Concerning Consultation, Cooperation and the Exchange of Information Related to the Supervision of Financial Services Firms and Market Oversight, entered into by the SEC and the FSA in 2006. This memorandum of understanding is designed to promote the coordination of robust and sound supervision of cross-border financial institutions and markets.

The meeting also provided the opportunity for the SEC and the FSA to continue discussions in the areas of corporate governance, particularly board risk oversight, and executive compensation. Consistent with the emerging international consensus, both agencies' current efforts seek to address, among other things, the intrinsic links between the types and degree of risk a regulated entity/registrant assumes and their corporate governance and compensation policies.

SEC Chairman Schapiro said, "This Dialogue has proven its utility again in allowing the SEC and FSA to share expertise and experiences regarding the rapid changes occurring in our capital markets. As regulatory reform advances on both sides of the Atlantic, we can feed this combined body of knowledge into the development of high-quality regulatory systems that take into account both national and international market dynamics."

FSA Chief Executive Hector Sants said, "Global cooperation between regulators is central to tackling the reform agenda and the relationship between the FSA and the SEC is key for international markets. Our ongoing dialogue gives us the opportunity to widen the areas of cooperation between the FSA and the SEC, in particular progressing our collaborative work on hedge funds and credit rating agencies."